Posted on Oct 28, 2013 by Ruth Loftus
A recently published report about the health insurance market in South East Asia predicts that the industry will grow by 15 per cent year on year until 2020. The Roland Berger report places particular focus on Singapore, one of the three largest economies in the region and the most advanced healthcare market. Current predictions are that the medical insurance industry will expand fourfold by 2020 as the demand for both private and group health insurance policies rises.
While the report focuses on healthcare across the South East Asian region as a whole, it does identify Singapore as quite distinct from other countries in the region. Singapore’s public health system has some of the best hospitals in the world serviced by some of the top doctors and nurses in the world. It also has a very strict co payment system which has been in place for decades with the aim of preventing citizens from depending on the government and abusing the healthcare services available. Although public healthcare costs are subsidized by the government at a rate of between 50 to 80 percent, the co-payment system ensures that no medical service is provided free of charge, so that healthcare has become much more of a personal and family responsibility.
In many ways, the Singaporean health system has been celebrated around the world as an example of making patients pay directly for part of the cost of the medical treatments and services they receive. But increasingly, citizens have had to pay more and more out of their own pockets, which has meant that healthcare has become a financial burden. Despite means tested government subsidies and other schemes to help Singaporeans save towards future healthcare or hospital costs, statistics from 2011 suggest that 60 per cent of healthcare expenditure in Singapore is paid out of pocket by insurers or by third party insurance. The recent Roland Berger report estimates that this trend will continue and that by 2020, 75 percent of total healthcare spending in Singapore will be privately funded.
There are several reasons why third party medical insurance has become such a big player in Singapore and is estimated to remain a very popular option in the coming years. These days, lifestyle diseases such as cancer and diabetes are increasing, but the co-payment policy and government subsidy framework tends to exclude high-risk individuals who might contract these or similar life threatening diseases. Traditionally, co-payment does not compliment preventative services either, such as cancer screening or regular consultations for diabetics. In these cases, self financing patients would opt out of seeking healthcare advice because of the associated costs. For several years now, private medical insurance companies have filled this gap by covering otherwise excluded ‘high risk’ health and also provide access to more regular screenings and expensive medical technology.
Another reason for the huge expansion of the private medical insurance industry in Singapore is the aging population. Public healthcare policy does not fund citizens over 90 years old, and elderly citizens under that age will often face staying in a lower class of hospital ward and expensive healthcare bills for regular or long stays in hospital. The current public health system seems to ignore statistics published earlier this year which state that the average life expectancy in Singapore was 83.75 years (81.47 for men and 86.2 for women). By 2020, 15 percent of the population in Singapore will be aged 65 and over. These numbers, go a long way to explaining why more Singaporeans are opting to pay for third party insurance policies to cover the costs of healthcare associated with old age.
In addition to these health concerns, Singapore is an increasingly wealthy country. As people grow wealthier, they often become more concerned about personal health and more aware of the benefits of healthcare. Those who can afford it, take healthcare into their own hands and pay for private healthcare policies and packages. These often offer coverage for a range of procedures from personal accident cover and emergency hospital bills, to maternity care and dental work. As well as these top services, the affluent population in Singapore expects the latest, fastest and safest medical care, so one of the biggest reasons to opt for private health insurance is the access it provides to quality private medical institutions. All of this means that spending on private health insurance policies will increase dramatically to an estimated cost of $4,121 Singaporean dollars per year.
Group policies are also another reason for health insurance market growth in Singapore. The group insurance segment has grown significantly in the last ten years, and there is still huge potential. Group insurance policies tend to be boosted by large corporate clients - and multinational corporations in particular. There are currently more than 7000 multinationals in Singapore. Looking forward to 2020, it seems that small and medium sized enterprises will be next to invest in the group insurance segment. Singapore is an equally strong market here since statistics in the Roland Berger report indicate that between 60 – 95 percent of the workforce in Singapore, Malaysia and Thailand work within these sized enterprises.
Furthermore, the number of non-resident foreigners living in Singapore was calculated at 37 percent in 2012. Only permanent residents are entitled to subsidized health coverage, so private healthcare facilities are an essential purchase for many expatriates and tourists. Since private clinics and hospitals are known for their high service level, the majority of expatriates living in Singapore opt to go private. Considering the number of non residents was estimated to be 3.36 million last year, this represents a substantial potential for private medical insurers to tap into.
All of the above indicates that the next six to seven years will be booming for medical insurance companies in Singapore. Nevertheless, there is still room for improvement with regards to the way insurance companies discriminate against people at risk and focus on healthy individuals; the way they set expectations for policyholders, and the way insurance companies communicate with hospitals during and after patient care. Looking forward, there is also the idea that medical insurance companies will play an increasingly important role in educating the population in Singapore and across South East Asia about healthy living including diet, exercise and other preventative measures.